Oil price rise could lead to SSA fuel surcharge

By Nelson Sigelman - October 18, 2007

The Steamship Authority members met Tuesday and played the oil futures market. The members bet that the cost of a barrel of oil will remain steady or rise.

At the authority's monthly meeting, management presented the members with a revised 2008 operating budget, based on a price of $80 per barrel, for a vote. The members told management to revise the budget to reflect a cost of $90 per barrel.

The revision to the $75,952,684 operating budget, voted by the members, added approximately $1 million to next year's fuel costs. SSA general manager Wayne Lamson suggested the members consider rate increases to make up the difference.

However, the members were unwilling to raise fares beyond an earlier proposed increase on the Nantucket route, needed to make up a $700,000 shortfall on that side of the ledger.

Instead, the board agreed to revisit the fuel cost issue in January. If the price of a barrel of oil continues to rise, as some analysts think it will, the SSA will consider a fuel surcharge as a way to make up the difference.

At one point in the discussion, SSA treasurer Bob Davis said that the US Department of Energy was predicting the price would drop to $73.50. "They also have a perfect record of being wrong. Perfect," countered Falmouth SSA member Robert Marshall, who argued strenuously that the budget be based on a price that reflected current world prices hovering near $90.

The projected increase in fuel costs could affect the amount of surplus cash available for capital projects. Those include the schedules for the Oak Bluffs terminal reconstruction and the mid-life refurbishment of the ferry Nantucket.

Held in the meeting room at the Oak Bluffs Library, the meeting attracted approximately 11 people aside from boatline officials and employees. For the most part, the SSA board moved briskly through the agenda with little discussion and few questions or comments from those in attendance, which included none of the Island's elected officials.

The meeting began with Mr. Lamson's business report. He said that August passenger (4.9 percent) and vehicle traffic (4.5 percent) increased when compared with the same period last year. His printed report also noted that the number of automobiles carried on the Vineyard route (50,775 trips) in August was the most ever carried in one month.

Carl Walker, SSA director of engineering, said that the first phase of the Oak Bluffs terminal reconstruction was proceeding. He cautioned that it could get noisy, a reference to the use of dynamite to help remove pilings, but said he would provide the town with ample notice.

With little or no discussion, the board unanimously approved future schedules, a new bulk reservation policy, and a fare policy for military personnel.

That was not the case when it came time to take up the 2008 operating budget. Mr. Davis said that, based on a request made at the September meeting, the cost of oil was revised from $70 to $80 per barrel.

But that was not good enough for the members. Robert O'Brien, Barnstable member, said the boatline would be sticking its head in the sand if it went with $80. "We should really be looking at $90," he said.

"Not to take it to at least $90 is foolhardy," said Mr. Marshall.

After agreeing to increase the projected cost of fuel, on an amendment proposed by Vineyard member Marc Hanover, the board agreed to revisit the issue in January and consider a fuel surcharge as an alternative to a rate hike.

The board did approve a three-percent rate hike on the Nantucket route. Flint Ranney, Nantucket SSA member, said that while he disliked rate increases, he understood the need. "I am regretfully going along with the rate increase management is proposing," he said. In doing so, he asked management to also look at cuts in administrative expenses.

In new business, Mr. Hanover said that he wanted to discuss the policy for the use of the Island Home lift decks. Mr. Hanover urged more use of the decks.

Mr. Lamson highlighted some of the complexities, including short turnaround times.

It was decided to ask the port council to prepare a report and recommendations for discussion by the board at a future meeting.

In other business and reports:

The board approved a new fare policy that will extend excursion fares to individuals on active military duty and allow those individuals to receive the discounted fare for one-way travel.

The board approved a revised 2008 spring operating schedule that includes additional freight service.

The board approved a 2008 summer and fall operating schedule. The summer schedule will go into effect on May 21, five days earlier than in 2007.

The board approved a new bulk reservation and waiting list policy for shippers that will give priority to trucks carrying a load comprised of at least 50 percent food items.

Management reported that year to date the SSA's net operating income was $3.8 million higher than projected.

The New England Fast Ferry carried 27,876 passengers in August between New Bedford and Martha's Vineyard and 82,631 year-to-date, a decrease of 4,239 when compared with last year.

The Hy-Line fast ferry carried 20,474 passengers in August between Hyannis and Oak Bluffs and 58,754 year-to-date, a decrease of 4,842 from last year.